CEOs tell Congress: Patent trolls are giving us the shakedown

Overstock’s top lawyer, Mark Griffin, told lawmakers on Wednesday that the company spends millions to scare away so-called patent trolls, but that many other retailers can’t afford to do the same and choose to settle instead. This amounts, he said, to “a tax on innocent operating companies.”

Griffin was one of four executives to address members of the House Judiciary Committee, as part of what has become an annual effort to fix the country’s troubled patent system.

He was joined by the CEOs of a credit union and an app company, who told horror stories of patent-based shakedowns, and by the founder of an exercise equipment maker, who warned Congress not to go too far with changes to patent law.

The focus of the hearing was patent trolls, which have plagued U.S. companies for years, but which remain resilient despite years of attempts by courts and lawmakers to curb them.

A plague of patent trolls

Patent trolls operate by arming shell companies with old patents, and then demanding that their targets pay a royalty or else face a costly lawsuit. The trolls flourish thanks to an economic asymmetry in the legal system that makes it easy to attack on the cheap, even as their targets must pay huge sums to defend themselves.

“It’s the patent troll business model, and it is especially effective when it is targeted at a small business with limited resources … Patent trolls practice a legal form of extortion,” Kathryn Underwood, CEO of Ledyard National Bank told the hearing.

Underwood explained how a troll used a mass mailing letter to demand that her Vermont credit union and four other nearby banks pay royalties because their ATMs were connected to the Internet. The banks decided to pool their resources in order to fight back, but ultimately concluded it made sense to simply pay off the troll instead.

The banks’ calculation was based on the prospective cost of litigation, but also on the likelihood that the troll could game the litigation process in a way that would chew up hundreds of hours of executive time. According to Underwood, such threats to time are another reason trolls wielding suspect patents win so often.

For now, trolls appear to be on a roll. According to Overstock’s Griffin, patent litigation has surged in 2015, with 499 new cases filed in February alone. It’s unclear how many of these were of the troll variety, though Griffin said that last year trolls accounted for 64 percent of all patent cases.

Fixing the system

Speaking at the hearing, Representative Darrell Issa, Republican of California, described the ordeal faced by many companies as getting “mugged by a patent troll.” Another member called the process a “scam.” The members also explored measures, set out in a bill called “The Innovation Act,” to fix the system.

One of these measures would require patent plaintiffs to spell out how exactly a company is infringing their invention. Currently, trolls operate by sending out generic complaints that do little more than list the patent and say that a company’s products are infringing it. Oftentimes, the defendant must wade into costly legal quicksand simply to find out what the troll is talking about.

Other reform measures would put time or cost limits on discovery, which is the legal process in which parties to a lawsuit furnish documents and testimony, as well as make it easier for a successful defendant to recoup legal fees from a troll.

Another part of the Innovation Act would make it easier for companies to shield downstream customers from troll attacks. This would be a change from current rules that let patent owners sue anyone in the supply chain – meaning that they can sue not only a manufacturer of an infringing product, but any retail shop or end user too.

This idea of protecting downstream infringers didn’t sit well, however, with hearing witness Bryan Pate, who is the CEO of an exercise bike maker called ElliptiGo.

Pate said that manufacturers in China, which he says are already ripping off his product, could start selling the knock-offs in the United States too. If this happens, his only recourse might be to sue retailers that are selling an unauthorized version of the patent-protected bike.

In response, Rep. Issa suggested that the right recourse might lie in seeking an import ban from the International Trade Commission, which is another body that handles patent issues.

Overall, the Members of Congress and the witnesses appeared largely supportive of the anti-troll reforms set out in the bill. Skeptics, however, will note these ideas have come up in past patent reforms bills, but have nonetheless failed to become law.

Political headwinds

A law that requires patent owners to explain what they’re suing about, or that eliminates the economic incentives of patent trolling, would appear to be a slam-dunk given widespread outrage over trolls.

Yet even as a growing number of influential tech and retail companies support the Innovation Act, patent reform may still fall on its face. That is what happened last year, when Democrats in the Senate killed a previous version of the law, and in 2011, when Congress passed the America Invents Act, a watered-down law that has done virtually nothing to curb patent trolls.

This time around, the House, which voted for the last version of the Innovation Act by a large margin, appears committed to going forward based on Wednesday’s hearings.

The Senate, however, may again toss a life-rope to the patent trolls. This may come by way of the STRONG Patent Act, a competing bill by Senator Chris Coons, Democrat of Delaware, that would blunt momentum for patent reform by offering largely cosmetic measures instead.

Such a law would be cold comfort to the likes of United for Patent Reform, a broad new coalition whose members includes everyone from Google to Verizon to the National Association of Home Builders.

The coalition’s best hope now lies with Senators John Cornyn (R-Tx) and Charles Schumer (D-NY), who are vocal supporters of the reform measures set out in the Innovation Act, but who have yet to introduce a Senate version of the bill.

“I’m continuing to work closely with Senator Cornyn and our other colleagues to build on the progress we made on our patent reform compromise last year,” said Sen. Schumer in response to an email asking about the bill’s progress.

In the meantime, small and large companies will watch nervously as patent trolls continue to chew their way threw the U.S. economy.

Todd Moore, the CEO of a small app maker called TMSoft, explained to the hearing that he got off lightly when a troll demanded that he wire transfer $3500 to settle accusations that one of his apps infringed a patent.

Thanks to a pro bono lawyer, Moore says he was able to fight the troll to a standstill. Other app makers, he said, had suggested it would end otherwise:

“They’re going to bleed you dry, and they’re going to win,” Moore said, describing what he heard from others who had tangled with the trolls.

These tech companies scored the most patents in 2014

Patents are the lifeblood of the tech industry—and if last year’s numbers are any indication, that sector is performing with vigor.

More than 300,000 utility patents—those are the ones for inventions, rather than designs—were issued by the United States Patent and Trademark Office last year, a record high. Such patents allow companies to put their inventions on lockdown for up to two decades, reaping rewards for significant R&D investments. And there’s another incentive: allowing businesses to stock up their intellectual property warchests and fortify their legal defenses.

“If you’re a bully you’re not going to pick on the big kids,” says Larry Cady, vice president of marketing and senior patent analyst at IFI Claims Patent Services, a firm that maintains a database of patents. “You’re going to pick on the pipsqueaks.”

So which companies are the head honchos? And what ideas are they bent on securing?

Fortune partnered with IFI Claims, which last month ranked the top 50 patent assignees of 2014, in order to examine the major players’ patents—most of which involve computing, hardware and software manufacturing, and mobile technology. A word to the wise: technology patents can be, well, technical. Sometimes, mind-numbingly so. “A lot of patents tend to be very regular,” Cady says. “They’re not fun to read. Once in a while you see something like an Apple Watch, but that’s like finding a needle in a hay stack.” (Apple ranked 11 on IFI Claims’ 2014 list.)

Well, we dug in anyway. Fortune peeked inside the patent caches of last year’s top earners to spot companies’ latest additions. What follows is a list expanding on our 2014 list of the top 10 R&D-spending companies, revealing with finer granularity where and how companies spend their innovation bucks.

How U.S. laws protecting America’s best ideas are killing innovation

The United States is a land of innovation. New products and services are being invented and marketed every day. A legion of young, talented entrepreneurs is starting countless new ventures, and venture funding is abundant. What could possibly be wrong with this picture?

Unfortunately, a lot. A particularly relentless group of Non-Practicing Entities (NPEs) – “patent trolls” – is putting the future of U.S. innovation at risk. NPEs stockpile patents, not with the aim of producing anything, but just with the goal of suing against infringement. A sizable set of NPEs buy up overly broad patents, then target relevant companies (often startups flushed with venture funding), and file frivolous patent infringement lawsuits with only one goal in mind: to coerce the targeted firms into settling for large sums of money so that they can avoid costly litigation.

In 2013, for example, Lumen View Technology LLC, an NPE based in Cambridge, Mass., used a patent on computerized matchmaking to sue numerous online dating companies. Among the targets was FindTheBest, a small operation Lumen View targeted in hopes of landing a $50,000 settlement. While other companies paid off Lumen View to avoid expensive and protracted litigation, FindTheBest resisted and last year won a $300,000 award from a U.S. District Judge who invalidated Lumen View’s patent and lauded FindTheBest’s ability to fight back. “It appeared that none of the other defendants sued by Lumen made that choice,” the judge wrote. “But for FindTheBest’s financial resources and resolve, Lumen’s predatory behavior would likely have proceeded unchecked.”

Unfortunately, most small companies are unable or unwilling to fight back against trolls. Defending a patent case can cost millions of dollars and can wreak havoc on a young venture. Consequently, NPEs are having a serious negative impact on innovation. Our research has revealed, for instance, that companies hit by NPE lawsuits became gun-shy about innovations, as illustrated by a 20% decline in R&D spending.

Beyond this, we identified some other troubling trends:

· Patent trolls frequently go after companies with significant cash on hand. Firms with an additional $2 billion in cash are more than six times as likely to be targeted by NPEs.

· NPEs are indiscriminate in their targeting. Thus, if there is a technology patent at issue, the NPE will not hesitate to pursue money being generated in another, non-technology-related part of a business.

Although the concept of patent trolling is not new, prior to our study, the impact of trolling activity had been difficult to measure. Unchecked, the trolls are undaunted in their efforts to profit from litigation regardless of how transparent those efforts might be. For example, an East Texas firm called RecruitMe, LLC, purchased a broad patent aimed at online transactions and used this single patent to sue 24 companies for patent infringement over the past year. That same patent was purchased from another firm, Data Match Enterprises, another East Texas operation, which had already sued 11 companies using the patent.

In the already complex and often perplexing field of intellectual property, the presence of patent trolls has caused chaos and confusion. Clearly defined property rights are essential for well-functioning markets. But unlike ownership of physical assets, the space of ideas is difficult to delineate. The patent is intended to solve this complexity by allowing the inventor of an idea to have sole commercialization rights for a period of time, unencumbered by copycats.

Not surprising in an age of vast technology innovation, the battles over intellectual property and patent rights have been growing in intensity. In the United States, the legal system is the arbiter of patent infringement, and the courts are weighed down with patent battles.

It also is not surprising that opportunists would see the potentially lucrative rewards to be had from invading this environment. Our research makes clear the need to check NPEs with more effective legislation that would focus on reducing or eliminating trolling efforts without screening out legitimate patent infringement lawsuits. To do this, legislation should assess large penalties on NPEs whose patents end up invalidated after a lawsuit and impose a mandatory patent review in the form of a pre-court appearance (paid for by the NPE) for any NPE that brings more than a certain number of cases on any given patent.

It is one thing to legitimately protect a patent from infringement. But patent trolls are a completely different species. Their aim is simply to target, intimidate, and extort. The future of our nation depends on a robust and verdant marketplace for new ideas. We can honor and empower innovators only by offering them protection from those looking for a quick buck at their expense.

Lauren Cohen is a professor of finance at Harvard Business School. Scott Duke Kominers is a Junior Fellow in Harvard University’s Society of Fellows. They are coauthors, with Umit G. Gurun, professor of accounting at the University of Texas at Dallas, of the research paper “Patent Trolls: Evidence from Targeted Firms.”

Google News shutters in Spain in response to ‘Google Tax’ law

Google is shutting down its news service in Spain as the country moves forward with a new intellectual property law.

Google News, the online search giant’s product that provides a stream of top articles from various journalism outlets, will close on Dec. 16 before the law takes effect in January.

Spain’s new law, nicknamed the “Google Tax,” would require publishers to charge Google GOOG to show their content on its news site.

The legislation doesn’t outline how much publishers would have to charge, but it would apply to “even the smallest snippet from their publications,” wrote Richard Gringras, the head of Google News, in a blog post Wednesday.

“As Google News itself makes no money (we do not show any advertising on the site) this new approach is simply not sustainable,” Gringras said.

Failure to follow the new copyright law in Spain would incur a fine of 600,000 euro (about $748,000).

Google News, which operates more than 70 international editions in 35 languages, will remove Spanish publishers from all international News sites when it shutters its local edition.

Hackers charged with stealing Xbox intellectual property

This story is in partnership with Time. The article below was originally published at Time.com

By Jack Linshi, TIME

Four members of an international hacking ring were charged with the theft of over $100 million worth of software and data related to the Xbox One and Xbox Live consoles and other technologies, the Department of Justice announced Tuesday.

The hackers were also charged for stealing data from the unreleased video games Call of Duty: Modern Warfare 3 and Gears of War 3, as well as the U.S. Army’s proprietary software used to train military helicopter pilots, the statement said.

Between Jan. 2011 and March 2014, the four men allegedly hacked into the computer systems of video game makers Microsoft, Epic Games and Valve Corporation, according to court documents. They also allegedly stole software from the U.S. Army and Zombie Studios, which produced helicopter simulation software for the Army.

Two of the charged members, whose ages range from 18 to 28, have already pleaded guilty to charges of copyright infringement and conspiracy to commit computer fraud.

“As the indictment charges, the members of this international hacking ring stole trade secret data used in high-tech American products, ranging from software that trains U.S. soldiers to fly Apache helicopters to Xbox games that entertain millions around the world,” said Assistant Attorney General Caldwell.

Three of the hackers are Americans, while one of the hackers is Canadian, the Department of Justice said. Officials believe the Canadian’s guilty plea is the first time a foreign individual was convicted of hacking into U.S. firms to steal information.

“The American economy is driven by innovation. But American innovation is only valuable when it can be protected,” Caldwell said. “Today’s guilty pleas show that we will protect America’s intellectual property from hackers, whether they hack from here or from abroad.”

Will America’s market for big data take off?

Our business world stands today at the threshold of a new industry, as “big data” gains value on a very big scale. Vast quantities of information are evolving rapidly into an asset class in its own right, akin to software and hardware with their own ecosystems and competitive dynamics and innovation cycles. And of course, legal issues.

There are troves of data being collected and stored and used by governments and companies globally. Complex algorithms are being developed to extract value from all this data. Retailers, for example, have a more detailed account of our lives than we ourselves can access. With their massive number of customer touch points, they’re so data-rich that they know what products and services customers want before consumers even know it themselves.

Some of this might sound a bit creepy. While retailers are not breaking any laws, there is much debate about the need for policies to harmonize privacy, prudence, social acceptance, and ownership with an undeniably massive business opportunity. But setting aside the privacy issues, what sort of legal regime do we need to ensure this new industry grows, and provides maximum private and public value? Do we leave the growing big data asset class to the law of the jungle? Or do we need new rules to foster growth and make our country the world’s most attractive home for the business of big data? These aren’t just abstract legal questions; they’re questions going directly to our patent, trademark, and copyright — intellectual property — laws.

When software was in its nascent stages, it was given away for free to sell hardware. Over the course of a few short decades an industry emerged. And along with it our legal system adapted to foster growth through new and evolving copyright, patent, and trade secret regimes. Now, software is a multi-hundred-billion dollar industry enjoying rapid growth and innovation, delivering bright new consumer benefits and life-saving breakthroughs at warp speed. And the U.S. leads the software industry practically across the board.

Many would say our country’s leadership is attributable in no small measure to our supportive intellectual property laws that have struck just the right balance between providing incentives for investment in innovation and providing access to third parties.

So taking software as a guide, it is fair to say the stakes are high, and policy matters. But no existing policy device within our current intellectual property system is tailored to mediate big data. However, it may be possible to interpret or re-fashion our IP laws so that the best protections and incentives are afforded to the data industry and the maximum social good is realized. While we do not yet have a complete roadmap for the interplay between big data and IP, we do have a few viable starting points. For one, our patent and copyright systems can continue to play their current roles – protecting inventive ways to draw value from data (through patents) and the creative aspects of data (through copyrights). There is certainly no evidence that a much greater or lesser level of protection is called for in these areas, and there is wisdom in the old saw: if it ain’t broke, don’t fix it.

The trademark system (think brands like Coke KO and McDonalds MCD ) may have an especially important role to play in accelerating the development of data as an asset class. Certification marks in particular may prove quite useful. Businesses and consumers alike benefit greatly from the vetting and standards compliance testing performed by certification organizations, such as the widely recognized and trusted UL (Underwriters Laboratories).

Once these organizations certify compliance by an applicable product or service, they permit the purveyor to affix a certification mark. When you purchase a lamp or a toaster, the “UL Certified” mark provides assurance that the appliance will plug into the socket in your wall and work with your home’s electrical system.

How would this work in the big data industry? A data certification mark would attest that the applicable data is accurate, properly formatted, and thoroughly covers the subject. In effect, the mark would certify that the data’s prongs will fit into the analytical software’s wall socket.

One can envision standards-setting organizations establishing norms and permitting use of applicable certification marks by those who collect, clean, organize, format, store, retain, curate, and provide data according to an agreed-upon level of quality and accuracy. Such standards in turn would enable just the kind of cross-use (between industries like retail and healthcare), follow-on use (beyond the purpose for which the data was originally collected, such as where soil composition data is used to understand moisture levels), and study (such as by academic, government, or industry researchers) that promise to make big data a huge creator of value.

At present, there is no reason to believe radical changes are needed in the IP system to render it safe for the advent of the data era. New opportunities for the trademark regime along the lines described above should be considered. In the end, the nations and regions that maintain a policy focus on fostering the growth of the data industry will be well positioned to lead into another promising field spinning out from information and computer technology.

David J. Kappos is a partner at New York City-based law firm, Cravath, Swaine & Moore, where he supports the firm’s clients with a wide range of intellectual property issues. From August 2009 to January 2013, Kappos served as director of the U.S. Patent and Trademark Office, advising the president, secretary of commerce and the administration on intellectual property policy matters.

Canada: A penalty box for pharma innovation

Consumers often hear complaints about the lack of patent protection for branded drugs in lesser-developed countries, where counterfeits are common and patents are frequently not respected. Surprisingly, however, the most aggressive nation on the planet when it comes to restricting patent coverage for innovative new medicines may be Canada.

The problem can be found in a narrow part of the country’s law called ‘the promise’ doctrine, which imposes a unique and rigid requirement for patent protection.

It demands that innovators in the pharmaceutical industry prove their new drugs will pass regulatory requirements necessary to gain government approval before a patent can be granted. This is reasonable in theory, but a ‘Catch-22’ in practice. Regulatory testing takes many years to complete, and in that time, the opportunity to obtain patent protection is likely lost due to other laws requiring prompt submission of patent applications and industry reporting requirements that would, paradoxically, render the invention unpatenable.

Given Canada’s status as a highly developed country, it is worth asking how its approach compares with those of other advanced countries. The answer: not well. In the United States, a pharma invention is presumed patent eligible, without need for direct evidence, so long as the purpose of the drug is specific (the patent identifies a real-world use) and credible (the invention is congruent with generally accepted scientific principles). This approach is echoed by European practice, as well as international treaties. Indeed, there is a growing list of drug patents that have been approved not just in the U.S., but in Europe and Japan as well — and in many cases in Korea and even China—but rejected in Canada. So adherence to the “promise” doctrine unquestionably positions Canada as an outlier.

The ramifications of Canada’s “promise” doctrine are not confined to its pharmaceutical industry. Last year, the Federal Court of Appeal upheld a ruling that a patent for helicopter landing gear was invalid. So while the “promise” doctrine has thus far had a disproportionate impact on the pharmaceutical industry, it holds the potential to chill innovation across any number of industries.

Canada’s Supreme Court set the stage for the “promise” doctrine in 2002 with the seminal decision, Apotex v. Wellcome, where the court established stricter requirements for pharmaceutical companies when it dismissed an appeal challenging patentability of the AIDS treatment and prevention drug, AZT.

Justifications of the “promise” doctrine rely on the premise that requiring additional disclosure ensures patentees will uphold their end of the patent bargain. But the doctrine actually incentivizes less disclosure. The savvy applicant will simply make a less explicit disclosure, leaving less room for the patent’s “promise” to be misconstrued, and thus making it less likely that the invention will be found lacking.

The “promise” doctrine ultimately forces Canadian judges in some cases to perform feats of logical acrobatics in order to reach the right conclusion. In a recent decision upholding Pfizer’s

Canadian patent for the drug Celebrex, the Federal Court rightly avoided a finding of invalidity for a drug with clear benefits. But it had to resort to curious reasoning in order to accommodate the muddled “promise” doctrine. The Court noted that the patent refers to the treatment of a “subject”— not “humans.” The patent described testing in rats, and thus demonstrated itself in rats. Since that was all that was promised, that was all that needed to be delivered.

A confluence of events played out through a series of court decisions has put Canada into an awkward position: a modern, innovation-based economy with a patent doctrine transparently hostile toward an important class of innovation. But why? Has Canada cleverly crafted a national health policy that outsources its share of the R&D burden necessary for creating new medicines, effectively free-riding its health care system on foreign innovation investment? Or has Canada given up on its own pharma sector, concluding that its interests are more in line with lesser-developed countries versus similarly sized advanced economies in the western world? Or is there a benign explanation—bad facts making bad law through spiraling court decisions, putting Canada’s patent system in the proverbial penalty box for a major foul of indefinite duration?

Whatever the explanation, the “promise” doctrine certainly is not sending positive messages to the pharma industry. Unsurprisingly, the branded pharma industry that conducts the vast majority of global R&D is not sitting by quietly. Their collective response started with normal diplomatic inquiries along the lines of ‘this must be a mistake’— and in time moved to the more emphatic ‘you’ve got to be kidding!’ As a sense of extremis has set in, one U.S. company, Eli Lilly, has taken the highly unusual step of filing a NAFTA action against the Canadian government for violating its treaty obligations. That a company is taking a country to its continent’s trade tribunal underscores the gravity of Canada’s perceived defection.

The stage is set for Canada to put this odd chapter behind it by clarifying its patent law through Parliamentary action overruling the “promise” doctrine. This simple step would return Canada to the norm among developed and developing countries. Resituating Canada amongst its peer economies would encourage investment in pharma R&D and send a message to all considering doing business in Canada that it welcomes the value added to its economy via investment in innovation.

David J. Kappos is a partner at New York City-based law firm, Cravath, Swaine & Moore, where he supports the firm’s clients with a wide range of intellectual property issues. From August 2009 to January 2013, Kappos served as director of the U.S. Patent and Trademark Office, advising the president, secretary of commerce and the administration on intellectual property policy matters.

Patent trolls’ favorite target? Not tech. Retail.

When White Castle started updating digital menu boards at its restaurants remotely last year by sending a signal from a computer at headquarters rather than in person at each location, it was thrilled to find a more efficient way of doing things.

But soon enough, it received a letter from a company holding a patent it claimed covered the act of sending such a computer signal and demanded compensation from the hamburger chain. The case is in litigation. If White Castle loses, it will have to go back to delivering a thumb drive with the programming information to each restaurant.

The 400-store chain also heard from a company saying its inclusion of a hyperlink to White Castle’s website in its customer emails and tweets was a business method that infringed on its intellectual property. All told, White Castle has heard from patent holders four times in the last 15 months, before which it had never faced any patent claims.

“For us, it’s really been disruptive,” said Jamie Richardson, a White Castle vice president. “It really does feel like a form of extortion.”

The number of new patent cases in U.S. District Courts rose 12.4% to 6,092 last year, according to data compiled by Lex Machina, a collaboration between Stanford University’s law school and its computer sciences department.

Many cases are brought by so-called “patent trolls,” a relatively small set of companies that don’t sell or own products or services but make most of their money from the enforcement or licensing of often old patents they buy on the open markets just as they are set to expire. They then assert them, even though many times the uses of the patent are so basic. The trolls are also known, less pejoratively, as non-practicing entities, or NPE’s. And according to the National Retail Federation, an industry lobby group, they lose 90% of the time.

Patent litigation has long been an occupational hazard for tech giants like Apple AAPL and HP HPQ, and NPE’s defenders say the spike in litigation is merely the result of more blatant infringement on intellectual property. Still, IP lawyers say there is no doubt that the number of frivolous claims is on the rise, and in the last two years, a new industry has become the favorite target: retailers and restaurants.

According to Patent Freedom, as of February, 3,775 patent complaints had been filed against retailers, compared to 3,681 against electronics companies. It found that the most commonly targeted companies include Amazon AMZN, Best Buy BBY and Wal-Mart Stores WMT.

“Retailers and restaurants have been slower to try new technology. They’re just getting into the shark pool. I think the trolls are seeking new hunting grounds,” said Cate Elsten, managing director of intellectual property consulting firm Ocean Tomo.

The timing couldn’t be worse for retailers and restaurants, which are scrambling to beef up their e-commerce capabilities. Common areas for patent-holders to assert their intellectual property are features like shopping carts, the tech that lets debit cards and gift cards process information from the cards’ magnetic stripes, and smartphone apps.

One major big-box retailer that spoke on condition of anonymity so as not to antagonize trolls told Fortune it has been targeted some 25 times in the last five years, in some cases by entities holding patents 20 years old that had nothing to do with information technology. It has paid on average $500,000 per case and often preferred to settle rather than get tied up in courts.

But legal costs aside, that retailer is paying a heavy price in another way: it is now less inclined to use innovative e-commerce technology developed by startups, opting instead for off-the-shelf solutions developed by larger companies that would bear the burden of any litigation or which have already defended their patent in court. The result, this store chain acknowledged, was a sub-optimal e-commerce site.

U.S. companies are unlikely to find relief soon from lawmakers. Last month, the U.S. Senate’s Judiciary Committee shelved indefinitely a measure to curb patent trolls after six failed attempts to bring it to a vote. Still, there was a sign of hope last month, courtesy of the courts. A U.S. Supreme Court ruling in Alice Corp. v. CLS Bank International potentially gave retailers a new tool for battling IT-based patent litigation by finding that abstract ideas implemented with a computer are not eligible patents. Macy’s M was one of the companies that filed a friend-of-the-court brief in that case.

But retailers are up against often unrelenting patent claimants. Online computer store Newegg was sued a few years ago by a company for alleged infringement of patents relating to online shopping carts. It ultimately won the case after the Supreme Court let an appeals court decision stand. But more recently, Tiffany & Co TIF and Zales, a unit of Signet Jewelers SIG, were among the dozens of retailers sued in May over their shopping cart functions by a company holding a patent originally filed in March 1992 and reissued on July 24, 2001. The patent deals with how information is stored but doesn’t specify an e-commerce function.

The NRF has been frustrated by lawmakers’ failed efforts to contain what it sees as a growing, and costly problem.

“This is a problem that’s diverting resources toward the problem of frivolous lawsuits,” said Beth Provenzano, a vice president at the National Retail Federation.